Three Examples of the PRC Overturning Hearing Officer Recommendations and Costing Ratepayers Hundreds of Millions of Dollars

Below are three examples of the PRC overturning their own Hearing Officer’s recommendations in just the last 18 months. Hearing Officers are the only people who hear evidence from all witnesses and review all the documentation submitted. PRC commissioners rarely attend any of the hearings. What, you may ask, is the point of having Hearing Officers who thoughtfully pour over all the evidence before making a decision if Commissioners will just vote as they will. These decisions cost ratepayers (YOU) hundreds of millions of dollars. What’s more they have supported PNM’s commitment to fossil fuels at the expense of developing hardly any renewables. In part due to these decisions, PNM rate payers have experienced a 62% increase in their rates over the nine years.
Example # 1.  NM Public Regulation Commission votes 3 to 2 to modify the recommended decision by the Hearing Examiner, Carolyn Glick on PNM’s proposed rate increase. In the fall of 2016, PNM sought a rate increase to cover its purchase of additional nuclear power from Palo Verde Nuclear. Hearing Examiner Glick concurred with New Energy Economy that the decision to purchase this nuclear power was not justified as there were less expensive options available and because PNM had provided no contemporaneous financial analysis to prove that PNM’s nuclear power purchase was cost effective. You can’t demonstrate your proposal is more cost effective, if you don’t provide current, relevant data.

Glick’s recommended decision stated “PNM’s decisions to extend the five [Palo Verde] leases (114 MW) and purchase the 64.1 MW [Palo Verde] were imprudent because it failed to show by a preponderance of the evidence that it reasonably examined alternative courses of action and that its decisions to extend the leases and purchase the 64.1 MW were its most cost effective resource choices.”  Furthermore, the Hearing Examiner Glick warned against rewarding imprudent acts stating: “[R]atepayers are not expected to pay for management’s lack of honesty or sound business judgment.” At p. 88 “[T]o consider financial harm in determining a disallowance founded on the utility being imprudent would, in essence, be rewarding a utility for its imprudent acts.”  Yet, the PRC voted 3-2 to overturn the Hearing Officer with Commissioners Lyons, Jones and Lovejoy voting to overturn.

 

Example # 2: PNM’s Decision to Re-Invest in Four Corners coal plant. On May 23, 2017 PNM and a dozen other parties signed a Revised Stipulation (settlement) seeking an increase in rates.  New Energy Economy lodged the sole Opposition to the Stipulation, claiming first and foremost that PNM’s re-investment in the Four Corners coal plant was “imprudent” and was a ratepayer subsidy of PNM losses at the 50-year old plant. PNM argued that its investment was prudent. But the Hearing Examiners disagreed with PNM. The Hearing Examiners found that: “there is a substantial record on which to make a finding of imprudence.  The Hearing Examiners find that the appropriate remedy for PNM’s imprudence in extending its participation in Four Corners and pursuing the $90.1 million of this investment and the $58 million of the additional life-extending capital improvements is the disallowance of all costs associated with the investment and improvements.” Despite the Hearing Officer’s strong position, Lyons, Jones and Lovejoy again sided with PNM and overturned the Hearing Officer.

 

Example # 3.  PNM’s Proposed Solar Development.  The Hearing Examiner recommended a finding that included: “The Hearing Examiner agrees with the opponents that PNM failed to show, as required, that the Affordable Solar Project is PNM’s most cost effective solar resource procurement among available alternatives.” Further, the Hearing Examiner found that the bidding process had been rigged in favor of bidders who offered to build the installation and turn it over to PNM rather than considering other options where PNM would not own the solar power source. Why is this important?  PNM-owned solar will ALWAYS be more expensive than other providers. The Hearing Officer found that:  “because the 2017 RFP process did not give PPAs [independent power producers] a fair opportunity to participate and compete. I found that allowing bidders only 31 days to respond to the RFP was insufficient and that the provision in the RFP allowing turnkey bidders [PNM-owned], but not PPA bidders, to use PNM-controlled sites was unfair and uncompetitive.”

Evidence in the case also demonstrated that earlier bids, from 2016 that PNM received and did not pursue were lower than the price of PNM’s $44.63/MWh turnkey bid from Affordable Solar. In 2016 PNM received levelized PPA solar bids of $41.63/MWh, $42.35/MWh and 42.65/MWh. Those solar PPA bids in 2016 are lower in price than PNM’s 2017Affordable Solar bid  submitted and accepted in this case. Yet, solar prices are declining. There is additional evidence in this case that PNM’s proposed turnkey bid with Affordable Solar is not the most cost effective bid among feasible alternatives. PNM entered into three PPAs with PNMR-D for the purchase and sale of the entire output of energy and renewable energy credits generated by 30 MW of solar energy facilities to be constructed for Facebook. The terms of the three PPAs, dated April 28, 2017, six months earlier, provides for an energy output payment rate of up to $39.85.  In short, there were clearly more cost effective options, as noted by the Hearing Officer, yet the PRC with Lyons, Lovejoy and Jones again voting together to overturn the Hearing Officer’s recommendations.

Clearly, if we are ever to have a fair hearing at the PRC we need to have Commissioners who will respect the findings of the Hearing Examiners AND adhere to the criteria for determining what kinds of investments are prudent:  the degree to which they are cost effective. That has not been how the PRC has operated for years. We have an opportunity in June 2018 to fix that by electing Janene Yazzie and Steve Fischmann